The U.S. economic contraction in the first quarter is fake – Currently

Last quarter, the U.S. economy contraction was a forgery, driven by the speed of imports of companies trying to propose tariffs. But consumption has remained stable, begging for how long tariffs will penetrate the economy and negatively impact hard data predicting future confidence surveys.The answer depends largely on when businesses that show their despicable behavior towards the future will put their money in their mouths and where they cut spending, which means a significant drop in consumer spending. While this may eventually happen, it may be closer to the end of the year given the uncertainty at this moment and the dynamics of company decisions.
Also read: First contract for the U.S. economy in three years

The stable labor market by April shows that consumers will continue to spend in the coming months, while companies that stockpile imported goods in the first quarter will undoubtedly meet demand. Don’t say that this means the economy is cutting President Donald Trump’s import taxation, just pushing big investments and labor decisions to more advanced policy clarity until later this year.

There is already evidence for the slate that updated earnings for the first quarter of this month. Overall, the S&P 500 has no plans to cut spending, and capital expenditures in 2025 are essentially since Trump announced the “Liberation Day” tariffs on April 2. This is partly powered by large tech companies that look unlikely to allow recent uncertainty to undermine their investment in AI. Alphabet Inc. reiterated its full-year capital expenditure guide last week, while Meta Platforms Inc. increased its projected spending to $72 billion this year from $39.2 billion in 2024, suggesting that the race to win AI dominance continues.

Executives told us that consumers continue to spend. Capital One Financial Corp. said that their credit card usage has risen slightly in April compared to this time last year, although they pointed out that the timing of Easter may help, and that some softness in airline spending has emerged. Visa Inc. said this week it saw no signs of overall weakness in consumer spending until April 21. Customer trends at regional casino operator Boyd Gaming Corp. were aligned with March in the first three weeks of April.
One of the reasons for this is that even if companies become more cautious in new recruitment, job opportunities can be retained. By April 19, the initial weekly unemployment claims were consistent with levels in the past three months.

None of this means that the direct and indirect effects of tariffs will not have a big negative impact on the U.S. economy, and only companies may reduce their confidence to take action longer than consumers.

Federal Reserve Gov. Christopher Waller said last week that he does not believe tariffs will have a significant impact on the economy before July. Freight activity and company inventory levels will fall before that, but at macroeconomic levels there are buffers and product alternatives that will start before top shelf economic data starts to break down.

Companies must weigh the consequences of their proposed levels of tariffs and potentially dial it back as the White House sometimes sends signals and financial market expectations. For now, this means contingency planning, not massive spending cuts.

July will mark the end of President Trump’s 90-day pause in tariffs for dozens of trading partners, which provides clarity for companies (unless another delayed launch). However, middle age is a particularly difficult time for companies to cut spending, especially when they begin to have an optimistic attitude towards economic growth. We have some recent evidence that U.S. companies have had to adapt to the rapid development conditions of the 2022 pandemic and are trapped in fear of recession.

Amazon.com Inc. responded to analysts’ concerns about large capital expenditures, Chief Financial Officer Brian Olsavsky said: “Many construction decisions were made 18 to 24 months ago, so we can adapt to mid-year restrictions.” Similarly, Meta did not announce significant layoffs until November 2022, although its revenues began to decline in the second quarter. The company didn’t announce its “Year of Efficiency” until February of the following year.

There is good news in slow-motion reality, how tariffs will flow into the Capitol Tax Agency and employee decisions. On the one hand, even as retailers’ shelves start to start clearing later this quarter, we are unlikely to see a sudden halt of overall economic activity after Lehman Brothers Holdings Inc. went bankrupt in 2008, or when Covid sanctuates the world’s shelter in March 2020.

Meanwhile, just because the company is more focused on contingency planning, rather than laying off millions of workers now, does not mean that recession will be avoided. The company is betting on the good times ahead, “Liberation Day” and is trying to do its best, hoping to reduce it in the Trump trade war. But if the economic outlook continues to darken when the people and investment plans for 2026 are formulated, they will be impatient.